5.  The applicant is a limited company under French law with its registered office in Paris.
6.  The applicant company ran an art gallery in Paris. In judgments of 13 September and 8 November 1993, the Paris Commercial Court ordered its judicial reorganisation, followed by its compulsory liquidation. On 21 December 2004, there being no more outstanding debts, the court terminated the liquidation proceedings.
7.  From 27 October 1993 to 12 April 1994 the tax authorities inspected the applicant company’s accounts for the period from 1 January 1991 to 8 November 1993. On 6 May and 5 October 1994 they sent them two supplementary tax assessments – one for 1991 and one for 1992 and 1993 – inter alia for supplementary tax on precious metals, jewellery, works of art, collectors’ items and antiques (hereinafter “the tax on works of art”), in accordance with the provisions of Articles 302 bis A to 302 bis E of the General Tax Code (since 1993, Articles 150 V bis to 150 V sexies of the same code).
8.  In addition to the additional tax, the applicant company was charged interest for late payment and a fine was imposed under Article 1788 ter of the General Tax Code (Article 1770 octies since 1993), equal at that time to 100% of the unpaid tax. On 25 January 1995 the company was served with a demand to pay a total of 15,927,514 French francs ((FRF) – 2,428,133 euros (EUR)), of which the fine accounted for half (FRF 7,963,757 or EUR 1,214,066.93).
9.  On 24 December 1997 the applicant company, represented by its court-appointed administrator, lodged a complaint with the Director of Revenue seeking relief from all the surcharges and fines demanded. It alleged on the one hand that the tax on works of art could be likened either to a value-added tax, which was contrary to Directives 77/388/EEC and 94/5/EC of the Council establishing special provisions applicable, inter alia, to works of art and collectors’ items, or to a capital-gains tax, with an effect equivalent to an export restriction or an internal taxation, both of which were prohibited by Articles 34 and 95 of the Treaty of Rome. The applicant company also argued that the fines, which could be likened to criminal convictions within the meaning of the European Convention on Human Rights, should have been imposed by a court.
10.  On 8 June 1998 the Director of Revenue rejected the complaint, stating that the tax concerned was not comparable to a value-added tax and did not hinder the free movement of goods, in so far as it applied to sales made either in France or in any other European Community member State. The Director of Revenue also pointed out that the Court, in its Bendenoun v. France judgment (24 February 1994, Series A no. 284) had acknowledged that the system of administrative penalties was compatible with Article 6 § 1 of the Convention, provided that their application was subject to court supervision.
11.  On 31 July 1998 the applicant company brought an action before the Paris Administrative Court seeking exemption from the supplementary tax on works of art demanded of it for the years 1991 to 1993 and from the related penalties, based on the same grounds as its earlier complaint.
12.  By a judgment of 4 November 2004, the court rejected the action. Concerning the conformity of the tax penalty with Article 6 § 1 of the Convention, it pointed out that the courts responsible for tax matters had full power of review over the facts concerned and their classification by the authorities, and decided in each case, in the light of the results of that review, either to uphold or apply the tax penalty effectively incurred in the amount provided for by law, without being able to adjust it to the circumstances of the particular case, or, if they considered that the authorities had not established that the infringements of the General Tax Code had been made out, not to fine the taxpayer. The court accordingly deemed that Article 6 § 1 did not necessarily require the tax court to have the power to adjust the amount of the penalty to suit the particular circumstances of the case.
13.  On 10 January 2005 the applicant company lodged an appeal with the Paris Administrative Court of Appeal.
14.  During those proceedings, order no. 1512 of 7 December 2005 reduced the fine provided for under Article 1788 of the General Tax Code (which became Article 1770 octies in 1993) from 100% to 25% of the unpaid tax.
15.  On 13 February 2006 the tax authorities reduced the fine by EUR 910,549.93, and on 6 July 2006 the additional tax on works of art demanded was reduced by EUR 28,735.12 because of a mistake in the calculation.
16.  The applicant company used the same arguments before the Court of Appeal as it had before the Administrative Court.
17.  By a judgment of 24 November 2006, the Administrative Court of Appeal, having taken note of the reductions and ruled that there was no need for it to take those amounts into account, upheld the judgment on the whole but reduced the price the tax authorities had placed on one work acquired by the applicant company. After careful consideration it rejected the applicant company’s formal and substantive arguments that the tax was at variance with Community law, for example, or that it should not have been applied to the acquisition of certain works. The court also rejected the argument under Article 6 § 1 of the Convention concerning the fine, for similar reasons to those given by the lower court, pointing out that the Administrative Court had full jurisdiction as required by Article 6 § 1, which did not require the court to be able to lower the rate of a fine when the legislation provided for a single rate.
18.  The applicant company appealed to the Conseil d’Etat on points of law, alleging, inter alia, that the tax was incompatible with Community law and the fine incompatible with Article 6 § 1 of the Convention, in so far as the court had no power to adjust it to reflect the seriousness of the taxpayer’s conduct according to a statutory scale.
19.  By a judgment of 27 June 2008, the Conseil d’Etat rejected the appeal. Regarding the fine, it held as follows:
“Considering ... on the one hand that, in order to make the rate of the fine proportionate to the offence, the order of 7 December 2005 fixed it at 25%, and on the other hand that the tax court, having exercised its full power of review over the facts of the appeal and the classification adopted by the authorities, decides, in each case, depending on the results of that review, either to uphold the surcharge imposed by the authorities or to cancel it if it considers that the taxpayer has not infringed the rules applicable to works of art, and that it therefore has full jurisdiction as required under the provisions of paragraph 1 of Article 6 of the Convention ..., which do not imply that even where the legislation provides for a single rate for the fine in question the court must be able to adjust it and apply a rate lower than that provided for by law; accordingly, in not setting aside the fine provided for in Article 1761 of the General Tax Code in the present case, the court did not commit any error of law.”
20.  On 5 April 2005 the applicant company lodged two appeals with the Conseil d’Etat challenging the interpretation by the Minister of the Economy, Finance and Industry (“the Minister”) of the tax law found in the basic administrative documents (in its successive versions of 15 October 1989 and 15 June 1993), whereby the Minister defined the base of the tax on works of art as their selling price, including commission.
21.  The applicant company pointed out that Parliament alone had the power to create a tax and determine the key details of its establishment and collection, and submitted that the Minister, in whose name the administrative documents concerned had been drafted, had overstepped his powers.
22.  During the proceedings the tax was completely rewritten and the numbering changed, by Article 33 of the Budget Amendment Act 2005, adopted on 30 December 2005 and effective from 1 January 2006. On that occasion the provisions concerning the base of the tax, previously found in the administrative documents, and those concerning the collection of the tax, previously found in the regulatory part of the General Tax Code, were incorporated in the legislative part of the Code.
23.  By a judgment of 10 February 2006, the Conseil d’Etat joined the appeals and rejected them. It considered, based on the impugned provisions of the General Tax Code, that the law “implicitly but necessarily” intended to base the tax on works of art on the selling price and, for want of further clarification on this point, the selling price taken into account as a base for the tax should be understood to include all the costs borne by the purchaser. That being so, the Conseil d’Etat considered that, in basing the tax on works of art on the selling price including commission, the Minister had correctly interpreted the impugned provisions and had not laid down any new rules or overstepped his authority.
24.  On 21 June 2005 the applicant company lodged two appeals with the Conseil d’Etat to set aside the decisions by which the Prime Minister had implicitly rejected its requests to revoke the regulations governing the means of collecting the tax on works of art, issued pursuant to the Law of 19 July 1976 introducing the said tax. It contended that the provisions in question were of a legal nature and had been introduced by an authority which had no law-making powers. It further alleged that the legal provisions concerning the persons to whom the tax applied were confusing and unclear, in breach of the principle, enshrined in Article 7 of the Convention, that only the law can define a crime and prescribe a penalty.
25.  By a judgment of 5 May 2006, the Conseil d’Etat joined the appeals and rejected them. It considered that the regulatory authority had simply laid down the procedure for collecting the tax, in conformity with the provisions of the Law of 19 July 1976, and had not overstepped its authority or the terms of its remit. It further considered that the argument concerning the principle, enshrined in Article 7 of the Convention, that only the law can define a crime and prescribe a penalty could not be relied on in favour of setting aside the refusal to revoke the regulations in issue.